Addressing threats to health care's core values, especially those stemming from concentration and abuse of power. Advocating for accountability, integrity, transparency, honesty and ethics in leadership and governance of health care.

Monday, January 28, 2008

More Managed Care Management Mumbo Jumbo

A number of news items about managed care organizations/ health insurers published last week make for an interesting juxtaposition.

Innovative Physician Reimbursement?

First were articles about managed care proposals for innovative physician reimbursement. First, from the Boston Globe, an article about a proposal to resurrect capitation.

Massachusetts' dominant health insurer is proposing to overhaul the way it pays doctors and hospitals, in what company officials said is an attempt to slow runaway healthcare costs and improve the quality of care.

Blue Cross and Blue Shield of Massachusetts wants to stop paying doctors and hospitals for each patient visit or treatment, a common arrangement that most experts agree has led to unnecessary, inefficient, and fragmented care that is sometimes harmful to patients.

Instead, they want to pay doctors and hospitals a flat sum per patient each year, adjusted for age and sickness, plus a significant bonus if the providers improve care, Blue Cross officials said. In most cases, the payment would cover all services from primary care doctors, specialists, counselors, and hospitals - forcing them to work together closely.

Hmmm, that sounds like "capitation," paying physicians or hospitals fixed sums per patient covered. That idea died out in the 1990s. Its main drawback was that it effectively transferred risk from the insurer to the physician or hospital. The latter were at risk for bankrupting losses if their patient populations turned out to be unusually expensive. The risk was greatest, per the laws of probability and statistics, for the doctors and hospitals with the smallest patient populations. Thus the problem with capitation is that it provides a perverse incentive to avoid sick or complicated patients. This suggests it will not improve quality or access.

Would this new version of capitation address this problem? Not obviously. The quote above suggests some adjustment for "sickness," but how whether that would be adequate to avoid perverse incentives is unclear. Also,

The Blue Cross plan has some similarities to the 'capitation' payment system behind those problems, which was widely used in the 1990s but was vehemently rejected by many doctors and patients. Blue Cross says its plan includes safeguards to avoid the undertreatment, underpayment, and strict controls on patient choices that doomed capitation.

'We have no interest in returning to the heyday of managed care or denying care,' [executive vice president for healthcare services at Blue Cross Andrew] Dreyfus said. He said several mechanisms would prevent patients from being denied appropriate care, including public scrutiny of doctors' performance and Blue Cross's commitment to cut off any caregiver providing substandard service.

That isn't very reassuring. The problem is not only that doctors might deny patients adequate care, but that doctors may avoid having sick or complex patients on their panels.

Health plans are drawing scrutiny for offering financial incentives to entice doctors to prescribe cheaper generic medicines, including paying doctors $100 each time they switch a patient from a brand-name drug.

The incentive program that has drawn the most scrutiny is one initiated last year by Blue Care Network, a health-maintenance organization owned by Blue Cross Blue Shield of Michigan. Under the three-month program, called Blue Reward$, primary-care physicians were asked to consider switching patients from a brand-name drug and received $100 for each plan member who filled a generic cholesterol-lowering statin prescription. To assist doctors, the HMO mailed them a list of Blue Care Network patients who were taking Lipitor and Lescol, two brand-name statins.

This seems to come from the two wrongs make a right school of thought. We, and many others have criticized pharmaceutical, biotechnology, and device companies for gifts and payments to doctors that may influence their decision making in ways that do not necessarily help their patients. Now managed care organizations and health insurers are doing the same, this time to directly influence physicians to prescribe more generic drugs. Of course, there are many patients now taking expensive brand-name drugs who could do just as well taking generics. However, there are many other patients for whom the brand-name drugs may provide the best benefit/ harm ratio. Paying doctors to prescribe generics, regardless of whether his or her patients may experience benefit or harm from this decision, is also a perverse incentive likely to lead to bad decisions harmful for some patients.

Such concerns were raised in the WSJ article.

But the more aggressive approaches, such as cash rewards for each patient switched from a given list of drugs, are coming under fire for injecting financial incentives into what some patient advocates and legislators say should be a purely medical decision. Medical societies are also concerned that such rewards may put doctors in the ethically questionable position of taking a payment that patients know nothing about.'I'm all for saving health-care dollars, but my concern is if there's a direct financial incentive for a physician to prescribe a certain generic drug, we cannot really trust that decision,' says Peter Koutoujian, house chairman of the Massachusetts legislature's Joint Committee on Public Health. He introduced a bill in the committee last month to ban drug-switching incentive payments to doctors.

It's interesting that both these innovations hinged on physicians' reimbursement, yet did not clearly address what seems to be the biggest distortion of such reimbursement, the imbalance favoring procedures over cognitive care, propagated by the Medicare reimbursement system influenced by the secretive RBRVS Update Committee (RUC). (See related posts here, here, and here.) Also, these innovations represent yet another example of managed care organizations/ health insurers avoiding addressing the prices of drugs and devices directly.

The Corporate Culture of Managed Care

Hints about why managed care organizations' and health insurers' leadership may favor perverse incentives and avoid confronting the more difficult problems comes from some more of last week's articles.

First, again in the Boston Globe, was an article about the leadership of the same Blue Cross and Blue Shield of Massachusetts that advocated a new version of capitation above.

Attorney General Martha Coakley is investigating the $16.4 million payment Blue Cross and Blue Shield of Massachusetts made to William C. Van Faasen, the insurer's former chairman and chief executive, who retired Jan. 1, according to a Blue Cross-Blue Shield director and others with direct knowledge of the probe.more stories like this

Coakley is also examining the new management structure at Blue Cross-Blue Shield under which Cleve L. Killingsworth holds the positions of chairman and chief executive.

The size of the payment is considered extraordinary by some because as a nonprofit, Blue Cross-Blue Shield is expected to use surpluses to support its healthcare mission.Commenting on public charities in general, Harry Pierre, a spokesman for the attorney general, said, 'A public charity must use all of its funds to advance the charitable purpose for which it was established.'

Van Faasen earned nearly $3 million in salary and bonus in 2006, according to a recent filing made with Coakley's office, which oversees the state's charities and nonprofits. That included $500,000 in base pay and $2.46 million in bonus based on results, according to the company's filing.

Some healthcare industry officials said they are troubled that Blue Cross-Blue Shield chose to let one person hold the titles of chief executive and chairman.

'This is a terrible design and it's just a bad idea,' said Nancy M. Kane, professor of management at the Harvard School of Public Health. 'It makes accountability of the organization to the community, represented by the board, a farce.'

Linda Crompton, chief executive of BoardSource, a Washington, D.C., organization that advises nonprofits on corporate governance, said the insurer's structure 'raises all kinds of issues about independence.'

'Having one person fill both positions is a very poor practice, and it's something we counsel against,' said Crompton.

A not-for-profit health care insurer which sees fit to make its executives rich, and set up a governance structure which renders accountability a "farce" is probably not going to be terribly hostile to perverse incentives for physicians.

In addition, last week featured several more stories about the corporate culture of managed care organizations/ health insurers.

From the AP, via the Indianapolis Star, was this story about the formerly "most admired executive" of WellPoint, a for-profit insurance company which runs multiple Blue Cross plans. Its California operation has under fire for allegations that it cancelled coverage of individuals after they developed expensive medical problems (see post here). The executive clearly seemed to have too much money to burn.

David Colby was one of corporate America's most admired executives before he was fired abruptly last spring for what was vaguely described at the time as misconduct of a "nonbusiness nature." Now details about his personal life are spilling out, and it's clear he was more than just Wall Street's darling.

Details in a motion filed Jan. 15 in Ventura (Calif.) Superior Court depict the former chief financial officer of health insurance giant WellPoint as a corporate Casanova -- a world-class, love-'em-and-leave-'em sort of guy who romanced dozens of women around the country simultaneously, made them extravagant promises and then went back on his word.

Colby helped put together the $16.4 billion deal that created Indianapolis-based WellPoint in 2004. He was named best CFO in managed care for four years in a row by Institutional Investor magazine.

After the company passed him over for CEO last February, it gave Colby thousands of stock options to stick around. But three months later, to Wall Street's surprise, he was out. All WellPoint has ever said is that he was ousted over a nonbusiness violation of the company code of conduct.

By all accounts, the 54-year-old Colby charmed attractive women by showering them with compliments and gifts.

DiCarlo and the other women suing him tell similar stories of aggressive courtship, big promises and broken hearts.

They say that Colby was carrying on with more than 30 women in the last half of 2007 alone....

Colby would supplement such declarations with gifts such as jewelry or trips, the women say.

In the wake of federal and state investigations into the company and a stock market free-fall, WellCare Health Plans chief executive Todd Farha and two other executives resigned Friday.

Farha, 39, announced his departure three months after federal agents stormed the company's Henderson Road headquarters Oct. 24. Agents removed documents and computer drives, but the U.S. attorney based in Tampa has not revealed the target of the investigation. The state attorney general's office also is investigating WellCare.

WellCare manages benefits for 160,000 elderly customers under Medicare plans and for 1.2 million low-income recipients of Medicaid benefits. The company, based in Tampa, Fla., is being investigated by federal and Florida authorities over possible overpayments, according to court records.

In October, 200 investigators conducted an all-day raid of the company’s headquarters. Several agents interrupted a quarterly board meeting and held directors there for hours of interviews, according to The St. Petersburg Times. They left the campus with a rented truck filled with seized documents.

Two days after the raid, Connecticut officials said they were reviewing whether WellCare hid the extent of its profit on a health insurance contract with the state Medicaid program. The Securities and Exchange Commission is also investigating.

The company has said it is conducting an internal inquiry and is defending itself against a lawsuit filed by a former employee who said WellCare defrauded the government.

Wellcare, by the way, was one of the companies which used to run the the state of Connecticut's Medicaid program, but was ousted from that role after it refused to tell the state about how it reimbursed physicians (see previous post).

To recapitulate, it seems that far too often, managed care organizations and health insurers, whether for-profit or not-for-profit, seem to be not very accountable to the people they insure, much less the physicians they purport to reimburse. Such lack of accountability may foster a corporate culture that puts enriching top managers ahead of providing accessible, quality health care at the most reasonable cost. Although these organizations' leadership may claim to innovate, it is unlikely that their innovation will do much good as long as the leaders remain representative of and accountable mainly to themselves. However, although we talk about it endlessly on Health Care Renewal, opaque, unrepresentative, unaccountable, and/or unethical governance remains off most peoples' and most policy-makers' radar as causing health care to be expensive, inaccessible, and mediocre.

ADDENDUM (28 January, 2008) - see also this comment on paying physicians to prescribe generic drugs on the Clinical Psychology and Psychiatry Blog.

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